PKF China desk team meets in Germany

China’s imperial policy over the past centuries helped to establish the Silk Road, a network of trade routes that linked China to Central Asia and the Arab world. The name came from one of China’s most important exports – silk. In 2013, China’s president, Xi Jinping, proposed establishing a modern equivalent, creating a network of railways, roads, pipelines, and utility grids that would link China and Central Asia, West Asia, and parts of South Asia.

This initiative, One Belt and One Road (OBOR), comprises more than physical con-nections. It aims to create the world’s largest platform for economic cooperation, in-cluding policy coordination, trade and financing collaboration, and social and cultur-al cooperation.

It was a smart move to regenerate economic growth. Due to the global recession in 2008 many Western economies stalled and this resulted in overcapacity, ranging from real estate to steel and cement. Not a moment too soon, President Xi Jinping allocated a massive sum of $900 billion to fund a global initiative and one expects that this money will be generating a positive multiplier effect on a number of coun-tries.

Can we blame China policymakers that they are seeking a return on their $3tn hoard of foreign exchange, including a formidable sum of $1tn in US Treasury bills? Read-ers may ask how can Malta, a tiny island in the Med, ever qualify for a part of this unique opportunity? Really and truly trade relations with China started in the early seventies when China had loaned us funds to build a number of medium sized indus-tries and had engineered the building of the largest dry dock in Europe at a time when unemployment was relatively high following the oil price shocks when Opec unilaterally tripled the prices of crude.

Since then, Malta diversified its industry and developed its transshipment business, facilitating the movement of thousands of containers coming from the “Silk Road” entering the Med to be temporarily housed in our Freeport and later redistributed to other ports in Europe. This Freeport activity was privatised and new owners invested in more gantries and software management. It is now rendering good returns to the French shareholders and of course, it is a good source of employment – well paid workers are active over three shifts.

So, the question is can Europe audit firms stand to gain in this China initiative? The scope for professional services to hundreds of new companies being incorporated is exciting and this month PKFI has invited a number of its offices to a grand meeting in Duisburg (Germany) at the offices of PKF Fasselt Schlage to discuss strategy with their Chinese counterparts.

The 10 offices are Munich, Cyprus, Malta, London, Italy, New York, Beijing, Paki-stan, Hong Kong and Shanghai. To start with let me introduce the host PKF Fasselt Schlage in Duisburg who welcomed the participants in their splendid offices located across the river. PKF Fasselt Schlage is a German firm fully committed to helping the China desk attract new business. They provide services to Chinese companies planning to invest in Germany or already having done so. Furthermore, they provide support to companies who are cooperating with Chinese investors – whether it be in Germany, mainland China, Hong Kong, Taiwan, Europe or worldwide. Another ac-tive member of the China desk is the New York office.

Founded in 1891, PKF O’Connor Davies has evolved from an accounting firm to be-come a team of high calibre professionals that provides a global, growing client base with comprehensive accounting, auditing, tax and specialised management advisory services at the highest level. With a profound commitment to active value creation, they connect with China investors to provide sound business advice, making use of key players and resources around the world. Other PKF participants included firms in UK, that is Francis Clark and Littlejohn, Pakistan, Munich, Cyprus, Malta and Italy. Such firms have deep roots in the China mainland and are ready to capture the flow of business on the proverbial Silk Road.

A recent addition to existing PKF offices in Hong Kong, Beijing and Shanghai is ZG. Based in Beijing, ZG has good geographical coverage with 2,000 staff and branches in 32 cities, and is among the top 20 accounting firms in China. It has es-tablished strategic alliances with many well-known investment banks, brokerages and fund companies and offers its customers a variety of services including Asset Assessment Service, Auditing & Advisory Services, Judicial Expertise, and Tax Ad-visory Service. In Duisburg, Mr Gengchun Yao, chairman at ZG, expressed his satis-faction that the organisation of a China desk at each PKF office will contribute to-wards a successful implementation of OBOR.

In his opinion, the China desk at each of the 10 participating firms underpin a unity of purpose. They want to be part of this success story. For instance, the Opposition (if elected) are promising to build a four-lane surface and underground Metro over a ten-year span to be built at a cost of €2.3 billion. This could be a fitting project that can be co-financed by using the OBOR fund provided a deal can be reached with the Chinese government.

A unique example of OBOR put in action is “dry port” on the Kazakh-Chinese bor-der and a railway link connecting Kazakhstan with Iran. China is a major investor in central Asian connectivity and as such was involved in core projects such as a $54 billion land route from China’s Xinjiang region to a deepwater port in Pakistan, Gwadar. There are also new rail links with Laos and Thailand and high-speed rail projects in Indonesia. China’s Ningbo Shipping Exchange is collaborating with the Baltic Exchange on a container index of rates between China and the Middle East, the Mediterranean, and Europe.

China projected an amazing 3,000km high-speed rail line from south-west China to Singapore. In conclusion, the meeting of minds in Duisburg has converged on the idea for PKFI to organise a sequel consisting of a grand meeting in Beijing next Sep-tember where all participants can meet their Chinese counterparts. Back home, once the election fever subsides and next Sunday the island gets the government it de-serves there is no time to waste over retributions. Ideally once democracy has spoken both winner and loser ought to respect the verdict and stand united. Only thus can we grasp the opportunities that the Silk Road map is offering. 

George Mangion is a senior partner of PKF audit and consultancy firm.

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